2 - The Indonesian State in Transition

Summary

INTRODUCTION

The Indonesian state continues to function as a rentier state, even after the fall of Suharto's New Order government in 1998. A rentier state is defined as one in which rents are paid by foreign actors directly to the state and its leaders, and where society is only involved in the utilization of the profits. The characteristic of Indonesia as a rentier state is evident from both the massive use of the project approach (which originated in the late 1960s) in Indonesia's sectoral development and the government's dependency on foreign loans. The political reform following the fall of Suharto's dictatorship did not eliminate rent-seeking practices. Instead, these practices remain rooted in the political relationship between the president in power and the country's ministers, and continue to govern the process of state (re)formation. This dependency on foreign funding remains apparent in the present Indonesian government.

This chapter discusses the characteristics of the Indonesian state as a rentier state (Section I) and illuminates the current political relationship between the president and the ministers (Section II). It also analyses how the concept of regional autonomy failed to change the central government–regional government relationship: at the national level, the central government has resisted the application of regional autonomy and at the regional level, regional autonomy has been hampered by widespread corruption practices inside and outside the government (Section III). The chapter then explains the formal changes incorporated in the emergence of regional autonomy and its effect on the organizational restructuring of the irrigation agency at the regional level in 2001 (Section IV). This chapter also details Indonesia's sectoral development, shaped by that project approach of the late 1960s, and how the adaptation of government organizational structures and financial regulations since the 1960s have had a profound and lasting effect on the development of the state irrigation agency (Section V).

SECTION I: INDONESIA AS A RENTIER STATE

The present discourse on the characteristics of the Indonesian state after the fall of the New Order government is shaped by two dominant propositions. Following the political reform of 1998, some of Indonesia's political observers consider that the state has entered a transitional phase — from authoritarian rule to a new democratic system of government — in which civil society will play a more prominent role.